In large pot, melt 2 Tbsp. butter over medium heat. Add onions and 1/4 tsp. salt, cook, stirring occasionally, until onions are a deep golden brown. Remove, reserve.
In same pot, melt remaining butter over med heat. Add potatoes, cook, stirring until coated in butter. Add milk, cream, paprika and remaining salt. Bring to a simmer, cook, stirring occasionally, until potatoes have softened and liquid has thickened, 10-12 min.
Preheat oven to 350°F. Coat a shallow 2-quart baking dish with cooking spray. Transfer half of potatoes and liquid to baking dish. Top with onions and 3/4 cup cheese. Arrange remaining potatoes over cheese. Pour in remaining liquid. Cover, bake 20 min. Uncover, bake until potatoes are tender and golden, about 30 minutes. Sprinkle with remaining cheese during the last 2 min. Let stand for 10 min. Garnish with Italian herbs.